President Donald J. Trump last week promised Americans “a giant, beautiful, massive — the biggest ever in our country — tax cut.” As delicious as that sounds, Trump’s tax overhaul may be tastiest for what it makes tiny, appealing, and compact: the 1040 tax return.
If Washington Republicans manage not to botch tax reform — as they wrecked Obamacare repeal — simplification should be among the new system’s most attractive elements, along with its consolidation of seven tax rates to three: 12, 25, and 35 percent. Letting Americans keep more of their money should energize an economy finally awakening from the slumber of the Bush-Obama years.
This should cheer Americans who struggle to machete their way through today’s tax system. The IRS’s Amazon jungle is impenetrable, menacing, and plagued by pitfalls at every turn. Last month in North Dakota, Trump called America’s tax structure “outdated, complex, and extremely burdensome.” He further lamented the “billions of hours wasted on paperwork and on compliance.” He added: “Our tax code is a giant self-inflicted economic wound.”
Trump’s answer to this mess:
“Under our plan,” he said, “95 percent of Americans will be able to file their tax returns on a single page without having to keep receipts, fill out schedules, or track endless paperwork.”
Trump’s much-welcome simplification initiative faces two immediate speed bumps:
Congressional Republicans from high-tax, left-wing states such as California and New York are squirming to keep the state-and-local-tax deduction. Dumping that loophole, however, will make Sacramento’s and Albany’s high-tax ways sting. And that would encourage such taxpayers to demand lower taxes from their governors, state lawmakers, mayors, and city councils.
This would be good.
“The best estimate is that roughly 95 percent of tax filers would simply choose the standard deduction rather than itemize,” predicts Jason Pye, vice president of legislative affairs with FreedomWorks. He notes that the standard deduction would increase nearly twofold under Trump’s plan. “When you begin looking at some of the deductions that Congress could do away with, like the state-and-local-tax deduction, you’re also looking at ending what is essentially an incentive for states to increase their tax burdens. Really, that deduction is little more than a subsidy for high-tax states like California, Illinois, and New York. It’s time Congress did away with it.”
Even more worrisome than the wagons encircling this exemption, Capitol Hill Republicans reportedly are warming to a fourth tax bracket for the highest-income earners.
This would be bad.
Washington Republicans have an infuriating habit of defeating Democrats at the polls and then impersonating them once in office. A fourth bracket, to ensnare the wealthy, smacks of far-left class warfare. Republicans should leave the rich-bashing to Bernie Sanders, Vermont’s socialist U.S. senator.
Republicans should know — and loudly exclaim — that the top 1 percent of filers made 20.6 percent of all adjusted gross income and paid 39.5 percent of all income-tax revenue in 2014, the latest Tax Foundation data confirm. The top 10 percent earned 47.2 percent of total AGI and generated 71 percent of federal income taxes.
Democrats whine that the wealthy will enjoy the lion’s share of Trump’s tax cuts. This is logical: The wealthy pay the lion’s share of taxes.
Democrats whine that the wealthy will enjoy the lion’s share of Trump’s tax cuts. This is logical: The wealthy pay the lion’s share of taxes. This is no more shocking than a company that pays most of its commissions to those who produce the most sales.
Republicans should encourage Americans to celebrate how this plan cuts their own taxes, not scorn those who will save more, because they pay more. Further, the ensuing, robust growth will lift the fortunes of all Americans — perhaps disproportionately those whose dim prospects will brighten as the economy expands.
Trump’s plan simplifies the tax code, streamlines tax filing, and creates three tax rates, all lower than today’s 39.6 percent top tier. Congressional Republicans should stop their needless self-sabotage, scrap this Leftist fourth rate on the rich, and speed the enactment of President Trump’s giant, beautiful, massive tax cut.
— Deroy Murdock is a Manhattan-based Fox News contributor and a contributing editor with National Review Online. William de Wolff, a J.D. candidate at Fordham University School of Law, provided research for this opinion piece.